[Direct answer]In the Beijing area, if a "arbitrate or litigate" clause stipulates both arbitration and litigation, the entire arbitration agreement will be invalid. According to Article 7 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China (effective from September 8, 2006), if the parties stipulate that disputes can be submitted to an arbitration institution for arbitration or to the people's court for litigation, the arbitration agreement will be invalid. After the clause becomes invalid, the arbitration process will be terminated, and the dispute will be litigated in the court of the defendant's domicile or the place of performance of the contract in accordance with statutory jurisdiction. The parties may also reach a written arbitration agreement separately after the dispute arises. Note two time limits: if there are objections to the validity of the arbitration agreement, they should be raised before the first hearing of the arbitration tribunal (Article 20 of the Arbitration Law of the People's Republic of China); if the party holds the arbitration agreement but the other party sues, the party should raise objections before the first hearing, otherwise it will be deemed to have waived the arbitration agreement (Article 26 of the same law). The invalidity of the clause only applies to the dispute resolution method and does not affect the validity of other clauses of the contract. For more details, please refer to the relevant provisions of the Arbitration Law of the People's Republic of China and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China. 北京地区对仲裁和诉讼均作出了约定的“或裁或审”条款，仲裁协议部分整体无效。根据《最高人民法院关于适用〈中华人民共和国仲裁法〉若干问题的解释》（2006年9月8日施行）第七条，约定争议可以向仲裁机构申请仲裁也可以向人民法院起诉的，仲裁协议无效。条款无效后，仲裁入口关闭，纠纷按法定管辖向被告住所地或合同履行地法院起诉；双方也可以在争议发生后另行达成书面仲裁协议。注意两个时限：对仲裁协议效力有异议的，应当在仲裁庭首次开庭前提出（《中华人民共和国仲裁法》第二十条）；己方持有仲裁协议对方起诉的，应当在首次开庭前提出异议，否则视为放弃仲裁协议（该法第二十六条）。条款无效仅及于争议解决方式，不影响合同其他条款效力。详见Legal services for disputes over commercial contracts in enterprises.

I. Problem Background and Typical Scenarios

It's not uncommon to see dispute resolution clauses that try to have their cake and eat it too: some stipulate "if no agreement can be reached, the matter shall be submitted to a certain arbitration committee for arbitration or sued in a certain court"; some specify arbitration in the main contract and litigation in the supplementary agreement; some have conflicting jurisdiction clauses in the main text and annexes; and some different versions of e-contracts contain inconsistent provisions. At the time of signing, everything seems fine, but once the other party breaches the contract, the party eager to resolve the dispute quickly will go to arbitration, while the party seeking to save money will go to court. This jurisdictional tug-of-war can drag on for half a year, delaying both preservation and enforcement. Clarifying the effectiveness rules of arbitration and litigation is a prerequisite for avoiding procedural stalemates. For more details, please refer to the relevant guidelines.Legal services for disputes over commercial contracts in enterprises.

II. Key points of contention

The controversy focuses on four points. First, the determination of the effectiveness of the arbitration clause: if the agreement on whether to arbitrate or litigate is unclear, the entire arbitration agreement is invalid (as explained in Article 7 above), and there is no automatic interpretation of "arbitration priority" or "litigation priority". Second, the path after invalidation: either sue according to statutory jurisdiction or supplement the written arbitration agreement after the dispute arises. Third, the time limit for objections: in arbitration proceedings, objections to the effectiveness of the arbitration clause must be raised before the first hearing of the arbitration tribunal (Article 20 of the Arbitration Law of the People's Republic of China); in litigation, if one party holds an arbitration agreement while the other party sues, the objection must be raised before the first hearing, otherwise it will be deemed as waiving the arbitration agreement (Article 26 of the same law). Fourth, the scope of effectiveness: the invalidity of the clause does not affect the substantive terms of the contract (Article 156 of the Civil Code of the People's Republic of China); however, if the dispute resolution clause itself is invalid, it cannot be inferred to be valid according to Article 507 of the Civil Code of the People's Republic of China, which applies to the situation where the main contract is invalid but the dispute resolution clause remains valid independently. In the judicial practice of Beijing, the court's review of the clause on whether to arbitrate or litigate focuses on the literal meaning of the clause. If the wording is vague but points to a single method, it may still be deemed valid.

III. Professional analysis by Henglue Law Firm

A film and television investment dispute handled by lawyer Xiong Binrong demonstrated the rule that arbitration and litigation can only be chosen one at a time. On May 20, 2022, Wang * signed a "Transfer Contract of Online Film Profit Rights" with Beijing B Culture Media Co., Ltd., investing 800,000 yuan, accounting for 3.6% of the total investment. On the same day, a supplementary contract was signed, stipulating that if the profit dividends were less than 800,000 yuan, B Company would make up the full amount. Beijing A Holding Group Co., Ltd. issued a "Guarantee Letter" to assume guarantee responsibility. However, the film was not released until May 17, 2023, while B Company had been deregistered on May 12, 2023, without going through legal liquidation or notifying Wang * to settle the profits. Wang * once sued the Beijing Chaoyang District People's Court, but the court ruled that the contract contained an arbitration clause and should be resolved through arbitration. After accepting the case, lawyer Xiong referred the matter to the Beijing Arbitration Commission, listing the two shareholders of B Company and the guarantor as respondents. He claimed that the shareholders should pay off the company's debts even though they deregistered without legal liquidation, and the guarantor should bear joint and several guarantee responsibility. The arbitration tribunal held a hearing in absentia and determined that the supplementary contract's conditions for making up the deficiency had been satisfied, ordering the return of the investment principal of 800,000 yuan and supporting reasonable expenses such as attorney fees and arbitration fees. Since the guarantor signed the "Guarantee Letter" on the same day as the main contract and constituted a part of the supplementary contract, he was also bound by the arbitration clause. In this case, the contract only stipulated arbitration, and the first party's lawsuit was dismissed. If the contract had been written as "arbitration or litigation", the entire clause would have been invalid, and both parties would have had to return to statutory jurisdiction. This case was handled by Beijing Henglu Law Firm.Xiong BinrongThe lawyer (practice certificate number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Legal basis: Articles 16, 18, 20, and 26 of the Arbitration Law of the People's Republic of China (amended on September 1, 2017); Article 7 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China (implemented on September 8, 2006); Articles 156 and 507 of the Civil Code of the People's Republic of China (implemented on January 1, 2021); and Article 24 of the Civil Procedure Law of the People's Republic of China (implemented on January 1, 2024). Action list: First, when signing a contract, only one dispute resolution clause should be selected: either write down the name of the arbitration committee to choose arbitration, or specify the jurisdiction of the court; Second, for those who have signed a clause that allows either arbitration or litigation, negotiate with the other party to sign a supplementary agreement to clarify one of them; Third, if the other party has initiated arbitration, raise an objection to its validity before the first hearing of the arbitration tribunal; Fourth, if the other party sues while the party itself has an arbitration agreement, raise an objection before the first hearing and avoid a passive response; Fifth, review the jurisdiction clauses of the main and subordinate contracts and multiple documents simultaneously to avoid conflicts with each other. For more details, please refer to the following link:Legal services for disputes over commercial contracts in enterprises.

5. Henglu Law Firm's Reminder

The cost of arbitration or litigation clauses lies not in losing the case, but in the procedural stalemate: jurisdictional tug-of-war, recalculation of deadlines, delay in preservation and enforcement, which can be a fatal drain on cash-strapped enterprises. When amending contracts and signing supplementary agreements, the dispute resolution clauses should be reviewed word by word like substantive clauses. When choosing arbitration or litigation, factors such as the finality of arbitration versus the two-instance finality of litigation, fee levels, and the connection between property preservation and enforcement should also be comprehensively compared and matched with the characteristics of the case. When handling similar cases in the Beijing area, it is recommended toBeijing Henglu Law FirmUnder the assistance of professional lawyers, we designed the dispute resolution clauses in advance.

VI. Frequently Asked Questions

Q1: If both arbitration and litigation are agreed upon, are the clauses still valid?

The arbitration agreement is generally invalid in its entirety (as explained in Article 7 above), and the parties cannot exercise one option at a time. For the litigation part, due to the lack of clear and specific jurisdiction agreements, the case is usually handled according to statutory jurisdiction. The invalidity of the clause does not affect the validity of other clauses of the contract (Article 156 of the Civil Code of the People's Republic of China). The determination of the outcome of the case shall be subject to the review of the court or arbitration institution, and lawyers cannot unilaterally guarantee the outcome of the determination.

Q2: If I choose arbitration or litigation, what materials do I need to prepare?

The contract and all its annexes (to gather all the jurisdiction clauses), supplementary agreements and correspondence (to prove the evolution of the parties' agreement), procedural documents that have been carried out (arbitration notices, copies of the complaint, and proof of the response period), and the other party's basic information and service address. The key point is to prove whether the parties have chosen one method or both methods.

Q3: What's the difference in cost between arbitration and litigation?

The arbitration fee is charged in stages based on the amount of the claim, and the first arbitration decision is final and without a second appeal. The litigation fee is charged in stages and cumulatively according to the "Measures for the Payment of Litigation Costs", and the costs of entering the second appeal may be nearly doubled. Lawyer's fees need to be negotiated separately for both paths. The convenience of arbitration in property preservation and execution connection, and the efficiency of the first arbitration decision being final, need to be weighed against the two-instance relief opportunities of litigation.

Q4: How long does it take to complete the entire process?

Arbitration is final and binding. It usually takes several months from the formation of the arbitral tribunal to the issuance of the award, subject to the specific provisions of the arbitration rules and the arrangements of the arbitral tribunal. For litigation, the ordinary procedure of the first instance lasts six months, and the summary procedure lasts three months. The second instance will take about three months more. If there is a tug-of-war over jurisdiction or effectiveness in the first step, both paths may add several months. Generally, arbitration can yield results in a few months, while litigation takes half a year to one and a half years.

Q5: I've already signed the termination or arbitration clauses. What should I do now?

Four steps: First, sort out all contract documents and confirm the true status of the jurisdiction clauses and points of conflict; Second, negotiate with the other party to sign a supplementary agreement and choose one clearly; Third, if the other party has initiated proceedings, raise objections to the validity or jurisdiction within the statutory time limit (before the first hearing of the arbitration tribunal or the court); Fourth, if the clauses are found to be invalid, sue the defendant in the court of the defendant's domicile or the place of performance of the contract, and apply for property preservation in time to prevent the other party from transferring assets.

The above answer is based on the judicial practice in Beijing. The judicial interpretations in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situations.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limits.Business and commercial legal services·Attorney Xiong Binrong·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.